Caraustar Industries, Inc. & McQueeney Gypsum Company v. Elcor Corporation ( 2006 )

Opinion filed January 12, 2006

Opinion filed January 12, 2006

                                                                        In The

    Eleventh Court of Appeals

                                                                   __________

                                                          No. 11-04-00245-CV

                                                    __________

                      CARAUSTAR INDUSTRIES, INC. & McQUEENEY

                                    GYPSUM COMPANY, Appellants

                                                             V.

                                  ELCOR CORPORATION, Appellee

                                        On Appeal from the 142nd District Court

                                                        Midland County, Texas

                                                Trial Court Cause No. CV-42,863

                                              M E M O R A N D U M   O P I N I O N

Caraustar Industries, Inc. (Caraustar) and its wholly owned subsidiary, McQueeney Gypsum Company (McQueeney), paid $1.3 million to settle a lawsuit brought against Caraustar by PDS&W for fraud and conversion of sulphur plant equipment. Caraustar and McQueeney then brought this action against Elcor Corporation (Elcor) for indemnity.  Elcor had sold the equipment to PDS&W, but the equipment was still on the land that Elcor subsequently sold to Standard Gypsum Corporation (Standard Gypsum) in 1986.  Standard Gypsum later merged into McQueeney.

Caraustar and McQueeney contended that Elcor owed them indemnity because (1) Elcor had agreed to provide indemnity to Standard Gypsum in a settlement and indemnity agreement in 1988 and (2) Elcor breached the warranties in its 1986 general warranty deed to Standard Gypsum that transferred the equipment as a fixture to Standard Gypsum.  The trial court granted Elcor=s motion for summary judgment holding that Elcor did not owe indemnity.  We affirm.

Background Facts

From 1969 to 1970, Elcor erected and operated a sulphur extraction plant on a tract of land in Culberson County.  In 1981, Elcor sold the sulphur reactor tower to PDS&W.  In 1985, Elcor also sold the remaining equipment as scrap metal to PDS&W for $50,000 under a contract providing that the equipment would revert to Elcor if not removed from Elcor=s land within one year.  More than a year later, PDS&W had neither paid for the scrap metal nor removed it when Elcor sold the land to Standard Gypsum (which later merged into McQueeney).

When Elcor sold the land to Standard Gypsum in 1986, Elcor had a suit pending against PDS&W to recover the purchase price for the sulphur reactor and other equipment which remained  on the land.^[1]  Standard Gypsum knew about Elcor=s sale of the sulphur equipment to PDS&W.  Article XII of the land sale contract between Elcor and Standard Gypsum (1986 Contract) was titled APersonal Property Reserved@ and dealt in detail with Elcor=s sale of the equipment to PDS&W:

(1)        the 1985 sales contract between Elcor and PDS&W was attached as an Exhibit;

(2)        the lawsuit by Elcor against PDS&W was described;

(3)        Standard Gypsum agreed that Elcor could leave the Personal Property on the land for three years from the date of the closing of the land sale or sixty days after the termination of the lawsuit between Elcor and PDS&W, whichever date was later;

(4)        the equipment and materials sold to PDS&W were to be referred to as the

APersonal Property@;

(5)        Elcor indemnified Standard Gypsum against any action or claim by PDS&W

that might be made against Standard Gypsum Aon account of the ownership of or payment for the Personal Property.@

The deed corresponding to the 1986 Contract provided that the land conveyance was made ASUBJECT TO that certain Agreement by and between Grantor and Grantee of even date herewith,@ referring to an indemnity agreement executed the same day.  The indemnity agreement stated that the land sold to Standard Gypsum did not include the Personal Property previously sold by Elcor to PDS&W and that Article XII of the 1986 Contract would govern the rights and obligations of Elcor and Standard Gypsum concerning the Personal Property, including the indemnity obligations of Elcor as to the Personal Property.

In January 1988, after extensive negotiations, Elcor and Standard Gypsum executed the 1988 Settlement and Indemnity Agreement (the 1988 Agreement), in which they agreed to share the cost of asbestos removal and to revoke and replace the provisions in the 1986 Contract concerning the Personal Property. Section I.1 of the 1988 Agreement defined the land sold to Standard Gypsum in 1986 as the ALand,@ and Section IV.1 defined the sulphur tower and equipment previously sold to PDS&W as the AReserved Personal Property.@  The 1988 Agreement provided that the Reserved Personal Property could remain on the Land until at least October 27, 1989, after which it would be Adeemed to have been abandoned by Elcor.@

In April 1998, McQueeney hired Nu-Concepts, LLC to remove the Reserved Personal Property from the land.  As a result, PDS&W sued Caraustar (McQueeney=s parent company) in Culberson County for conversion and fraud.  McQueeney was not sued in that suit.  Caraustar initially joined Elcor as a third-party defendant seeking contribution or indemnity, but Caraustar later nonsuited Elcor and refiled its claim for indemnity in Midland County.  Caraustar and McQueeney contended in the trial court below that Elcor owed them indemnity based on two theories: (1) Elcor had agreed to an indemnity in the 1988 Agreement that covered the Culberson County suit and (2) Elcor had breached its warranty against encumbrances in the 1986 general warranty deed because the deed conveyed the sulphur equipment as a fixture and PDS&W=s ownership constituted an encumbrance. The trial court granted a traditional summary judgment in favor of Elcor.

Standing of Caraustar and McQueeney

In addition to Elcor=s traditional summary judgment motion, Elcor also moved for a no-evidence summary judgment asserting that neither party had standing because Caraustar had not succeeded to any rights of Standard Gypsum and because McQueeney was not a party to the Culberson County suit brought by PDS&W.  On appeal, Elcor again argues that neither party had standing to bring an indemnity claim against Elcor.

A plaintiff must have both standing and capacity to bring a lawsuit.  Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845 (Tex. 2005).  As the supreme court in Lovato explained:

The issue of standing focuses on whether a party has a sufficient relationship with the lawsuit so as to have a Ajusticiable interest@ in its outcome, whereas the issue of capacity Ais conceived of as a procedural issue dealing with the personal qualifications of a party to litigate.@ [6A Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane, Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d] ' 1559, at 441 (2d ed.1990).  (Emphasis added)

Lovato, 171 S.W.3d at 848. A plaintiff has standing to sue when he or she is personally aggrieved by the alleged wrong, regardless of whether the plaintiff is acting with legal authority.  Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661 (Tex. 1996).  A party has capacity when that party has the legal authority to act, regardless of whether the party has a justiciable interest in the controversy.  Id.

Caraustar and McQueeney were aggrieved by having paid the Culberson County suit settlement, and they did file documents showing capacity in their response to Elcor=s motion for a no-evidence summary judgment. That Caraustar was not entitled to any benefit under the 1986 Contract or the 1988 Agreement because it was not a party to those agreements was an additional defense available to Elcor which we need not address.  Elcor=s indemnity agreement in the 1988 Agreement did not cover the matters involved in the Culberson County suit, and there was no breach of warranty in the 1986 deed because the sulpher plant equipment was classified as personal property and was conveyed to PDS&W prior to the deed. Elcor and Standard Gypsum could not have made it more evident that the sulphur plant equipment was not part of the land conveyed to Standard Gypsum.

The Issues

Caraustar and McQueeney first assert that the trial court erred in granting Elcor=s motion for summary judgment and in denying Caraustar and McQueeney=s cross-motion for partial summary judgment because the money Caraustar and McQueeney paid to settle the Culberson County suit falls within the scope of Elcor=s indemnity obligations in the 1988 Agreement. Second, they assert that the trial court erred by granting Elcor=s motion for summary judgment and in denying Caraustar and McQueeney=s cross-motion for partial summary judgment because Elcor breached the warranties it gave to McQueeney (successor to Standard Gypsum) in the 1986 general warranty deed.^[2]

Standard of Review

To determine if the trial court erred in granting Elcor=s motion for a traditional summary judgment, we must consider the summary judgment evidence in the light most favorable to the nonmovant, indulging all reasonable inferences in favor of the nonmovant, and determine whether the movant proved that there was no genuine issue of material fact and that it was entitled to judgment as a matter of law.  Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546 (Tex. 1985); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671 (Tex. 1979).

This appeal involves the construction of two documents:  the 1988 Agreement and the 1986 deed.  Because the construction of a document is a matter of law, we review the matter on a de novo basis.  JVA Operating Co. v. Kaiser-Francis Oil Co., 11 S.W.3d 504 (Tex. App.CEastland 2000, pet. denied).

1988 Settlement and Indemnity Agreement

Caraustar and McQueeney argue that the $1.3 million they paid in settlement of a lawsuit in Culberson County triggered an indemnity obligation owed by Elcor pursuant to the 1988 Agreement signed by Elcor and Standard Gypsum, McQueeney=s predecessor.  Indemnity agreements are construed under normal rules of contract construction.  Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000).  The primary goal is to ascertain, and give effect to, the parties= intent as expressed in the instrument.  Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex. 1983); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).  If the written instrument is so worded that it can be given certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. Coker, 650 S.W.2d at 393; Century Bass Club v. Millender, 949 S.W.2d 841, 844-45 (Tex. App.CWaco 1997, writ denied).  The 1988 Agreement is not ambiguous.

We consider the entire 1988 Agreement in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.  Universal C. I. T. Credit Corp. v. Daniel, 243 S.W.2d 154, 158 (Tex. 1951).  No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument.  Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex. 1962). Language should be given its plain grammatical meaning unless it definitely appears that the intention of the parties would be thereby defeated.  Century Bass Club, 949 S.W.2d at 844‑45.

Significant in the 1988 Agreement was Section VI.4, entitled AEntire Agreement; Modifications,@ which expressed Elcor=s and Standard Gypsum=s agreement that the 1988 Agreement would control their rights concerning the sulphur equipment (the Reserved Personal Property):

VI.4 Entire Agreement; Modifications. Upon execution of this Agreement, the Prior Indemnity Agreement and provisions contained in Articles XI and XII of the [1986] Purchase Contract shall be of no further force or effect and the provisions of this Agreement shall be and contain the entire agreement between the parties hereto with respect to the matters covered hereby and shall govern the rights and obligations of the parties with respect to liability arising from or relating to the Reserved Personal Property or the ownership of, or operations on, the Land, including, but not limited to, the surface condition of the Land.  (Emphasis added)

In Section V.5 of the 1988 Agreement, Elcor limited its indemnification of Standard Gypsum to claims arising out of Elcor=s ownership of the Land and Elcor=s conduct in connection with the Reserved Personal Property:

A.        Elcor=s ownership of the Land (including all claims made by any taxing authority pursuant to Article VIII, ' 1-d of the Texas Constitution or ' 23.55 of the Texas Tax Code); and

B.         The conduct of either Elcor or its agents . . . in connection with the Reserved Personal Property, including, but not limited to, the showing or exhibition of the Reserved Personal Property or the removal, dismantling or alteration of the Reserved Personal Property.

PDS&W=s Culberson County suit against Caraustar alleged two intentional torts: fraud and conversion.  Thus, the legal basis for the suit was PDS&W=s alleged ownership of the Personal Property and McQueeney=s intentional conduct in removing and selling the Personal Property through Nu-Concepts.  Neither Elcor=s ownership of the Land nor Elcor=s conduct gave rise to PDS&W=s Culberson County lawsuit.  The Culberson County lawsuit by PDS&W against Caraustar did not fall within A or B in Section V.5 of the 1988 Agreement.

Even though we hold that the Culberson County lawsuit did not come within the plain meaning of the indemnification provision in Section V.5, the context of the agreements between Elcor and Standard Gypsum provide additional reasons for our conclusion that Elcor owed no indemnity under the 1988 Agreement.  Elcor=s agreement to indemnify Standard Gypsum was significantly broader in Article XII of the 1986 Contract^[3] than it was in Section V.5 of the 1988 Agreement.  The replaced Article XII of the 1986 Contract, entitled APersonal Property Reserved,@ provided that Elcor agreed to indemnify Standard Gypsum as to:

A.        Any action . . . of PDS & W, its successors or assigns which may be made against [Standard Gypsum] on account of the ownership of or payment for the Personal Property.

Indemnification by Elcor for any action against Standard Gypsum by PDS&W on account of its ownership or payment for the Personal Property was expressly voided by Section VI.4 of the 1988 Agreement.

Comparing Article XI in the 1986 Contract with Section V.2 of the 1988 Agreement is also instructive as to the meaning of AElcor=s ownership of the Land@ in Section V.2.  In Article XI of the 1986 Contract, Elcor indemnified Standard Gypsum for a broad array of claims:

[W]hich [Standard Gypsum] may incur or become subject to as a result or arising out of Elcor=s ownership of the Subject Property (including all claims made by any taxing authority pursuant to Article VIII, ' 1-d of the Texas Constitution or ' 23.55 of the Texas Tax Code); provided, however, that the obligations of Elcor with respect to the Personal Property shall be governed by the provisions of Article XII.

Article XII (b) and (c) provided that Elcor indemnified Standard Gypsum for Elcor=s conduct in removing, dismantling, or altering the Personal Property.  Elcor and Standard Gypsum dealt with the ownership of the Land and the Personal Property as separate subjects in both the 1986 Contract and in the 1988 Agreement. It was PDS&W=s ownership of the Reserved Personal Property, not Elcor=s ownership of the Land, that led to the Culberson County lawsuit.  It was McQueeney=s conduct, not Elcor=s conduct, that also led to the Culberson County lawsuit.

The trial court correctly ruled that neither Elcor=s ownership of the Land nor Elcor=s conduct was involved in the Culberson County lawsuit. 

The 1986 General Warranty Deed

Caraustar and McQueeney argue that the sulphur reactor tower and plant equipment were fixtures that were conveyed with the land to Standard Gypsum.  Based on their assumption that the sulphur reactor tower and plant equipment were fixtures, they contend that PDS&W=s ownership of those fixtures constituted an encumbrance in violation of Elcor=s warranty of title to the real estate.  We disagree with both their assumption and their conclusion.

Absent a specific reservation in a deed, buildings and other improvements used in connection with realty in such a way as to constitute appurtenances or fixtures pass as a matter of course by the conveyance.  N.P., Inc. v. Turboff, 111 S.W.3d 40, 44 (Tex. 2003).  Elcor sold the tower and equipment before selling the land to Standard Gypsum, and the parties contractually agreed in the 1986 Contract that the tower and equipment were personal property at the time of the 1986 land sale. Article XII of the 1986 Contract specifically reserved the tower and equipment from the land sale and referred to them as APersonal Property.@

The 1986 deed was Asubject to@ an indemnity agreement executed the same day.  That indemnity agreement again made it clear that the land conveyed did not include the Personal Property:

As used herein, the term Acondition of the surface of the Subject Property@ shall not include any materials or equipment described in the Purchase and Sale Agreement dated April 30, 1985, by and between Elcor Corporation and PDS & W, or the reactor tower sold to PDS & W by Elcor through auction in September, 1981 (all of which materials and equipment and the reactor tower are hereinafter referred to in the aggregate as the APersonal Property@).  The rights and obligations between Elcor and [Standard Gypsum] relating to the Personal Property shall be governed by the provisions of the Contract of Sale and Purchase (the AContract of Sale and Purchase@) between such parties dated August 29, 1986.

Although improvements usually become part of the land, parties may agree that those improvements are personalty.  Travis Cent. Appraisal Dist. v. Signature Flight Support Corp., 140 S.W.3d 833, 837-38 (Tex. App.CAustin 2004, no pet.).  Standard Gypsum agreed that the Personal Property was not included in the sale of the land.

In the 1986 Contract, in the 1986 deed itself, and in the 1988 Agreement, Elcor and Standard Gypsum agreed that the Personal Property did not pass under the 1986 deed. Section IV of the 1988 Agreement defined the sulphur reactor tower and plant equipment as AReserved Personal Property,@ just as Article XII of the 1986 Contract had referred to them as APersonal Property.@ Had the 1986 deed purported to pass the Personal Property as a fixture, there would have been no reason for Section IV in the 1988 Agreement.  Elcor did not breach its 1986 deed to Standard Gypsum.  Both issues on appeal are overruled.

The trial court below did not err in granting summary judgment to Elcor.

This Court=s Ruling

The judgment of the trial court is affirmed.

TERRY McCALL

JUSTICE

January 12, 2006

Not designated for publication. See Tex. R. App. P. 47.2(a).

Panel consists of:  Wright, C.J., and

McCall, J., and McCloud, S.J.^[4]

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^[1]That suit ultimately resulted in a final judgment for Elcor in 1987.

^[2]Normally, the denial of a summary judgment is not reviewable on appeal because it is not a final judgment.  Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996).  In this case, however, both the motion for summary judgment and the cross-motion for partial summary judgment involve the interpretation of the same contractual provisions in the 1988 Agreement and the 1986 deed.

^[3]The deed was Asubject to@ the indemnity agreement executed on the same date.  That indemnity agreement dictated that Elcor=s indemnity obligation relating to the Personal Property would be governed by Article XII of the 1986 Contract.

^[4]Austin McCloud, Retired Chief Justice, Court of Appeals, 11th District of Texas at Eastland sitting by assignment.